The Campaign Finance Merry-Go-Round

Ninety-five years ago Truman Newberry, a modest, well-mannered scion of an old-money Detroit family, suddenly found himself under federal indictment and his very name synonymous with political corruption. Newberry’s “crime”? He had run for the United States Senate as a long-shot underdog against the President’s handpicked candidate and nation’s most famous man, Henry Ford. And thanks to a skillful ad campaign financed by nearly $200,000 contributed by Newberry’s family members and friends (the equivalent of about $3 million in 2013), he had won.

Before Super PACs, McCain-Feingold, “soft money,” and the Keating 5; before Watergate, and even before Teapot Dome, there was the Michigan Senate race of 1918. In Curbing Campaign Cash, Paula Baker, an Associate Professor of History at The Ohio State University, has written a lively account of one of the nation’s most contested elections and earliest campaign finance “scandals.” A brief 150 pages, Curbing Campaign Cash takes the reader on a fascinating tour through Michigan industrial and political history, the boardrooms and rivalries of Detroit’s business and social elite, and the machinations of national and progressive politics in the early twentieth century.

Unlike the typical political saga, however, Baker presents the story not as a morality tale of honest government corrupted by big money, but rather as a cautionary story about big government regulation of honest money and the political choices of the electorate.

In 1918 President Woodrow Wilson, looking to increase the Democratic majority in the Senate and, in particular, to improve the chances of Senate approval for the League of Nations, personally recruited Henry Ford to run for the U.S. Senate from Michigan. Ford, deeming himself above partisanship, entered both the Democratic and Republican primaries, as allowed by state law.

Though he remained an industrial icon, by the late 1910s some of Henry Ford’s less savory characteristics were becoming apparent, at least to those who knew him. His extreme pacifism, his unpredictably, his social resentments against traditional elites (epitomized by men such as Newberry) and his suspicious nature, bordering on paranoia, were authentic concerns to Republican leaders. (His anti-semitism would make its first strong public impression during the election contest itself). Yet how to defeat a man who was at once the richest, perhaps best known, and arguably most admired public figure in America, and whose extensive network of dealers around the state constituted a ready-made campaign organization?

Most elements of the Michigan GOP coalesced around Newberry, a major shareholder in the rival Packard Automotive Company and heir to a family fortune amassed in timber, copper, banking, railroads, and other industries, as the best man to stop the popular Ford, whom they saw as dangerously erratic. Newberry – “proper, restrained, polite, and indistinct” – was a supporter of Teddy Roosevelt and had briefly served as Roosevelt’s Secretary of the Navy, but outside of Detroit social circles, he was scarcely known in the state. Asked to list his qualifications for the Senate, Newberry admitted that they were “all too few” but included “loyalty, education, experience, a desire to serve and help others, honest, sincere, sober.”

Newberry was still serving in the Navy, based in New York, meaning that not only could he not campaign in Michigan, he was unable to comment on public issues had he wanted to. Even in a Republican state, as Michigan then was, Ford could only be defeated by somebody who could begin to match him in name recognition, and who could communicate the potential drawbacks of a Senator Ford. This required that money be spent to communicate with voters.

Progressive reformers, however, seeking to cleanse politics from the “taint” of money, had passed a law limiting a Senate candidate in Michigan to spending $3750, or less than $60,000 in today’s dollars. Defeating a man as well known as Ford on such a budget was probably impossible.

But the law contained a giant “loophole” – it applied only to spending by the candidate, not to spending undertaken by a committee on the candidate’s behalf. Newberry hired Paul King, a young political wiz, to manage a campaign committee, and paid little attention what went on after that. What went on was the most expensive Senate campaign in history to that time, as King raised funds from Newberry friends and family, hired campaign workers across Michigan, and blanketed the state with newspaper ads. King highlighted Newberry’s military service and that of his two sons, contrasting it with Ford’s pacifism and the military deferment granted his son, the star-crossed Edsel. Newberry’s major campaign plank was opposition to the League of Nations.

When Newberry defeated Ford, first in the Republican primary and then in the general election (with Ford as the Democratic nominee), Democrats cried foul. They argued that the large sums spent on his behalf tainted the election and constituted “corruption” and “fraud.” President Wilson, never one to shy away from the abuse of power, set his Department of Justice upon Newberry, even before election day. Eager to avoid Michigan juries sympathetic to Newberry, the government convened a grand jury in New York on the theory that Newberry had signed papers related to his candidacy there. The jury voted 16-1 against an indictment. Unperturbed, Attorney General Thomas Walsh ordered the FBI to investigate possible violations of the Federal Corrupt Practices Act. Senate Democrats launched a series of investigations, and when these turned up nothing illegal, tried to amend the tax code to retroactively tax 1918 campaign expenditures at a rate of 100 percent, a measure that barely failed.

But Henry Ford was not finished. Deploying his vast fortune, he hired investigators to comb the state, “[taking] every bit of local bragging and complaining as … a kernel of fact.” The Attorney General arranged for a special prosecutor to handle the case, which was brought in Grand Rapids, outside Newberry’s circle of influence in Detroit. At trial, a ridiculously partisan Judge Clarence Sessions proclaimed that “the very life of the Nation is threatened” by the “filth and poison” of campaign spending, “infinitely more to be feared than the terrors of the Ku Klux Klan.” The judge excluded most of Newberry’s evidence, then gave the jury a strained interpretation of the statute and an instruction that “drew a straight line to a guilty verdict.”

Newberry would eventually be vindicated, legally (on the rather technical grounds that the statute did not apply to primary elections), but his name would go on to become an epitaph for good-government reformers: “Newberryism” would be the standard phrase for political corruption for the next decade.

Baker sees in these events a warning of the unintended consequences of regulation. Turn-of-the-century progressives sought to get not only money, but politics out of politics. In doing so, they got more of each. The end of the partisan press, a goal of progressive reformers, merely increased the need for paid political advertising. So did the effort to weaken political parties and create a more candidate-centered approach to campaigning. The decline of patronage, the emphasis on non-partisanship, and the insistence that voters be educated through “literature, powerful and persuasive argument, and illuminative human interest personality stories” all increased the need for candidates to spend on advertising and campaign workers. As Baker wryly notes, running an honest campaign actually cost more than running a crooked one. Yet progressive reformers targeted the money, regardless of the uses to which it was put. Primaries added still more to the cost of politics.

Moreover, the focus on spending had its own problematic aspects. Even the truest believer could not always separate partisan interest from true principles of good government. From start to finish, investigations into campaign finances became inherently partisan. Absent actual bribery or corruption, “reformers” argued that political persuasion and participation were themselves corrupt. The ensuing investigations did nothing to encourage democracy, but, says Baker, “destroyed faith in democratic institutions.”

To anyone who has followed the campaign finance saga of the last two decades, the story has a remarkable sense of familiarity to it. In the partisan campaign and abuse of prosecutorial power to unseat Newberry (“a political job, from beginning to end” said Michigan’s senior Senator, Charles Townsend), newspaper editorials were referenced as fact, self-serving statements by opposition politicians held forth as evidence of wisdom from those who understood the alleged dangers best, and naked abuses of government power praised by sanctimonious advocates of “good government. ” “Reformers” were themselves prepared to cut most any corner and to unfairly smear any reputation if it helped to obtain the political goal of “good government” reform. And always, the debate was conducted in high dudgeon: “rhetorical ambitions soared far higher than the record before them,” notes Baker.

Such rhetoric contributed to and played off of public ignorance. Kathleen Lawler, the sensible Clerk to the Senate Committee on Elections, complained that “all over the state … voters… would say- ‘… [W]e must help stamp out this terrible scourge of Newberryism that is destroying our state and our nation.’ When asked – ‘What is Newberryism?’…, they did not know… .”

Indeed, today one of the most frustrating things about the campaign finance debate remains the sheer demagoguery of the issue, starting at the very top. For example, during his 2010 State of the Union address, President Obama famously upbraided the Supreme Court for its recent decision in Citizens United v. Federal Election Commission, saying

Last week, the Supreme Court reversed a century of law to open the floodgates for special interests — including foreign companies — to spend without limit in our elections. Well, I don’t think American elections should be bankrolled by America’s most powerful interests, and worse, by foreign entities. They should be decided by the American people, and that’s why I’m urging Democrats and Republicans to pass a bill that helps to right this wrong.

Yet every assertion in the statement is factually incorrect – the decision did not reverse a century of law, it did not allow foreign companies or foreign entities to spend any money in U.S. campaigns, and it did not allow anyone but the American citizens to decide American elections.

Observers of today’s debates will also recognize the rank hypocrisy and incumbent self-dealing in the early reform movement. Senators saw Henry Ford as a one off – but if money could elect an empty suit such as Truman Newberry against a better known opponent (and most incumbents are better known than their challengers), whose seat was safe? So the laws targeted the type of influence that Newberry, but not Ford, might bring to bear.

Of course, whether the public was ill-served by the election of Newberry is a different question altogether. Michigan voters were fully aware by election day of the campaign’s record spending. Meanwhile, though his engineering and business achievements are incontestable, in matters of public affairs Ford was more the empty suit than Newberry. He was ignorant of history (he testified to the Senate that the American Revolution happened in 1812, and that Benedict Arnold was a writer) and government (when first approached about running by a Wilson confidante, he asked, “What does a Senator have to do?”). He believed that Newberry’s campaign had been financed by “a gang of Jews” as part of “a conspiracy to control the Senate.” (Much as today’s “reformers” run a nativist campaign against Citizens United based on unsupported claims of “foreign money.”) Perhaps, given the information provided by the campaign, the public really did think that the sober, sincere Newberry was a better choice. Or perhaps they actually did oppose the League of Nations.

No one has yet “found a way to bring together the discordant goals of campaign finance reform,” concludes Baker. The abuse of federal investigatory and prosecutorial power, neglect for the rule of law, innuendo and character assassination, incumbent self-dealing, rank hypocrisy, and unintended consequences of efforts to purify the system, all present in the Newberry case and to one degree or another in reform politics today, should make us glad “campaign finance reform” has gone no further than it has. Indeed, Curbing Campaign Cash might make the reader reconsider whether the game is worth the candle at all.

Bradley A. Smith is the Josiah H. Blackmore II/Shirley M. Nault Designated Professor of Law at Capital University Law School. He is former Chairman of the Federal Election Commission, and Chairman of the Center for Competitive Politics.

Comments

Interesting bit of history of which I was unaware. Looking forward to reading the book. The best way to protect the right of the people to express themselves is to do away with piblicly financed campaigns, allow unlimited spending but with full disclosure of donation sources. Except…, protecting the privacy of those sources is and is becoming more so, an important element in their safety. Look no further than Floyd Corkins and his FRC shooting to see the dangers therein.

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